“Not-for-profit does not mean not-for-revenue. Transitioning from a donor-dependent charity to financial self-sustainability. Understanding that there is more than one test for appropriate use of funds.”
Thread Together’s CEO, Greg Fisher
LONG-TERM FINANCIAL SELF-SUSTAINABILITY AS THE ULTIMATE GOAL
Philanthropic effort is often associated with people who are of greater financial means. It makes sense to look at wealthier people to be the foundation of charity funding. In my opinion, long-term financial self-sustainability for a charity requires a much expanded model. Even more so, I firmly believe that it should be the ultimate goal. There needs to be a respect for the large philanthropic contributor; a recognition that overtime their dollar may be called upon to help elsewhere. It should not forever be relied on to fund on-going operating requirements.
A FUNDING MODEL OF ITS OWN
Foundation philanthropic contribution is like the capital base or injection into an organisation. It funds the initiative to a certain point, after which that initiative ought to have created a funding model of its own. If considered in traditional commercial terms, it means that operating revenue needs to provide life after the seed or foundation funding is exhausted.
Of course, the benefit generally of philanthropic contribution upfront is that there is no expectation of financial return or repayment of donated funds. The philanthropist is satisfied with the knowledge that the narrative is being achieved, as well as likely tax concessions arising from the donation itself.
MEANINGFUL COMMUNITY ENGAGEMENT PROGRAMS
Transitioning a community organisation or charity away from being totally donation reliant to operational financial self-sustainability requires the creation of interesting and meaningful community engagement programs. These programs need to have multiple purposes, including:
- Getting the work of the charity done – thereby reducing labour (operating costs);
- Empowering people with the joy of giving – many people do want to help others, so the participation in, or support of managing, meaningful programs, affords people that opportunity;
- Achieving the stated outcomes of the charity;
- Fostering “ambassadorial” commitment – growing the number of volunteers and program participants in meaningful and loved programs, provides an increasing army of people messaging the charity work to others. This exponentially grows the charity in size and community relevance;
- Collaborative outcomes with other charity and community agencies: A fundamental part of charity modelling is determining where the organisation sits within the social provider sector. The more that programs can be created to provide multiple social outcomes for people in need, the more those programs will be relevant. This has the dual benefit of helping people more, and attracting more participants to the revenue-generating programs as well.
THE JUSTIFIABLE FOCUS ON CHARITIES
The other side of the ledger is the expenses relating to a charity or community organisation. There is justifiable focus on charities in terms of their use of funds attracted. The usual call or test is the percentage of funds used for the administration of the charity and the residual benefit flowing to the recipients/those in need.
THE TRUTH OF ITS PERFORMANCE
This test, whilst important and relevant in many service-provider charities, is not an effective catch-all for every charity. Indeed, some organisations will spend every dollar raised on the administration, because its function relates to a non-monetary purpose. A standardised key performance indicator measure (KPI) will deliver a big fail to such organisations. However, in complete contrast to how it would appear, the truth of its performance is the exact opposite.
THEORY PUT INTO REAL LIFE
Let’s put the above theory into real life. I am the CEO of Thread Together, a charity organisation established in 2012 by Andie Halas, then of Australian swimwear giant Seafolly. Through her own experience with end-of-line stock, Andie realised that the well-known model relating to food rescue organisations (such as Oz Harvest and Second Bite) could, and indeed should, extend to brand new clothing.
Rather than seeing excess new clothing, no longer of any use or value to a manufacturer, go directly to land-fill (an environmental negative), Andie believed that properly organised, these clothes could be gathered, sorted, and sent to charities across Australia for distribution directly to people in need – to crisis centres, refuges for woman surviving domestic violence, refugees, the homeless, long-term unemployed seeking to get into the work-force, ex-inmates, long-term hospitalised, poverty stricken, Indigenous communities as needed, and many others.
WHAT CLOTHING MANUFACTURERS SELL AND WHAT THEY STAND FOR
Andie contacted her friends in the fashion manufacturer world to gain their support. What was soon recognised was a simple and financially sensible way for clothing manufacturers to not only be known for what they sell, but also what they stand for. Rather than having the cost of storing end-of-line clothes, paying for their pick-up and transportation and dumping costs, they now need only call Thread Together who will collect the unsaleable new stock and then, using its DGR tax deductibility status, provide the manufacturer with a tax receipt for the cost value of the stock. It’s what you call a ‘no-brainer’ – rather than paying for storage and disposal costs, manufacturers can now donate that stock and receive a financial benefit back.
A FULL WARDROBE FOR SOMEONE IN NEED
Thread Together receives donated new clothing. That stock is then sorted by gender, age, season, and purpose. It is then matched with the most appropriate charity, and forwarded to them to be distributed directly to people in need. The receiving, sorting and dispatch processes are extremely labour intensive – the cost of that labour, if paid for, would be unsustainable.
The basic cost of operating Thread Together is in the order of $500,000p.a. The aim of Thread Together is to support 100,000 people each year with a full wardrobe of clothes. With the stock provided at no cost, with the distribution via the charities at no cost, and with the volunteers sorting the clothes at Thread Together, Thread Together’s costs are contained.
This model means for $5, Thread Together can provide a full wardrobe to someone in need.
MEASURE OF SUCCESS
But, there is a need to go further. That is, to fund the $500,000 with self-generating revenue, to replace the philanthropic contribution over time. This revenue will come from team building programs for corporate groups, school excursion programs, OOSH, and others.
In summary, the philanthropic support funds the charity to a point in time, after which Thread Together, through its developing community engagement programs will be able to “stand on its own financial legs.” Its measure of success will not be based on how much it cost to run the administration (as that is known upfront), but rather on the following factors:
- how many people were supported, based on the charity’s raw costs of $500,000 (was the objective of supporting 100,000 people achieved in a given year);
- how many volunteer hours were enabled;
- how many community engagement program participants were empowered; and
- what additional services were created from Thread Together’s core activity.